11th CIRCUIT REVERSES SUMMARY JUDGMENT IN FAVOR OF PLAINTIFF’S CLAIMS UNDER THE FCRA
11th CIRCUIT RULES IN FAVOR OF CONSUMER AND REVERSES DISTRICT COURT OPINION GRANTING SUMMARY JUDGMENT IN FAVOR OR DEBT COLLECTOR
Teri Lynn Hinkle v. Midland Credit Management, Inc. Midland Funding, L.L.C.,
Encore Capital Group, Inc. (11th Cir. July 11, 2016)
Facts: This case involves two “junk debt” accounts that were purchased “as is” by Midland and were allegedly attributable to “Terri Hinkle” and “Teri Hinkle.” The junk debt was purchased by Midland. When Midland purchased the debts it did not where the only information about the debt that was received when purchase account-level documentation, such as any document that a creditor provided to a consumer about a debt, a complete transactional history of that debt, and a copy of any judgment on that debt.
After acquiring the debt, Midland sent collection letters and received a payment for one of the debts but made no notation as to who made the payment. Hinkle learned of the collection accounts when she pulled her credit report in May 2011. In September 2011, Hinkle made a credit report dispute to Equifax, Experian and Trans Union and disputed the accounts as not belonging to her. The credit reporting agencies notified Midland of Hinkle’s disputes. Hinkle also sent a direct dispute to Midland. In her dispute to Midland, Hinkle asked Midland to validate the debt. Later, she orally disputed the debt to Midland. In response, Midland verified the accounts belonged to Hinkle and continued to report the debts to the credit bureaus.
Posture: Teri Hinkle (“Hinkle”) filed her pro se lawsuit against Midland Credit Management, Midland Funding and Encore Capital Group on April 30, 2013. In her complaint, she alleged the debt collectors violated the Fair Credit Reporting Act (FCRA) and the Fair Debt Collection Practices Act (FDCPA). The Southern District of Georgia granted summary judgment in favor of the debt buyers holding the furnishers performed a reasonable investigation of Hinkle’s credit report disputes. The Eleventh Circuit reversed the district court’s dismissal of the plaintiff’s claims under the Fair Credit Reporting Act (FCRA) and remanded the case to the trial court.
Court’s Analysis: On appeal, Hinkle argued the district court erred in granting summary judgment on her claims under the FCRA, including § 1681s-2(b) because Midland did not perform a reasonable investigation in response to her disputes. The 11th Circuit reviewed the district court’s finding that Midland satisfied its investigation duties under 1681s-2(b) when it: (1) double-checked the information that it had reported to the CRAs against its electronic files; and (2) sent Hinkle a letter stating that “it would be helpful to have a copy of any documentation [she] may have that supports [her] dispute.”
Upon receipt of a notice from a consumer reporting agency (CRA) that information is disputed by a consumer, a furnisher (a company who furnishes data to the credit bureaus) “must: (1) conduct an investigation with disputed to the disputed information; (2) review all relevant information provided by the [CRA] in connection with the dispute; and (3) report the results of the investigation to the [CRA].” See § 1681s-2(b)(1). If the data furnisher determines the disputed information is inaccurate, incomplete or cannot be verified, then the furnisher is to modify, delete or permanently block the reporting of the disputed information to the credit bureaus.
On a case of first impression in the 11th Circuit as to the reasonableness of a furnisher’s investigation, the 11th Circuit adopted the reasoning employed by other Courts of Appeal, namely, the reasonableness of the investigation will determine whether the furnisher complied with its obligations under the FCRA. The 11th Circuit determined that Sections 1681i(a) and 1681s-2(b) are related such that reasonableness is the standard to evaluate investigations.
Section 1681s-2(b) marks three possible outcomes of an investigation: verified accurate as reported; determination that the disputed information is inaccurate or incomplete; or the disputed information “cannot be verified.”
The Court analyzed the plain definition of the terms “verification” and “investigation.” To verify means to prove to be true and investigation means “a detailed inquiry or systematic examination or searching inquiry.” Johnson v. M.B.N.A. Am. Bank, N.A., 357 F.3d 426, 430 (4th Cir. 2004). “These definitions support the conclusion that § 1681s-2(b) requires some degree of careful inquiry by furnishers of information.”
First, a furnisher’s investigation may be reasonable if it verified the disputed information based on documentary evidence demonstrating the accuracy of the disputed information. In other words, the documentary evidence reviewed by the data furnisher during its investigation revealed the reported information is true. Second, a furnisher’s investigation may be reasonable if it concludes the disputed information is unverifiable when the disputed information does not exist or evidence demonstrating the accuracy of the information is “too burdensome to acquire.” Third, a furnisher’s investigation may be reasonable when the investigation concludes the disputed information is inaccurate or incomplete. Ultimately, the reasonableness of a furnisher’s investigation “is a factual question normally reserved for trial.” Westra v. Credit Control of Pinellas, 409 F.3d 825, 827 (7th Cir. 2005).
Here, Midland limited its investigation to comparing the personal identifying information in the CRAs’ database with the personal identifying information contained in Midland’s internal data files. Midland obtained the data from other debt buyers – not the original creditors. Indeed, the personal identifying information “was the same information Midland had reported to the CRAs in the first place.” Midland did not review any account information to determine whether Terri Hinkle or Teri Hinkle were the same consumer who incurred the debts in 2006 and 2006. The 11th Circuit determined that a reasonable jury could find that Midland’s investigation was unreasonable and that the documentation that Midland had was insufficient to prove that the accounts did belong to Hinkle. In other words, a jury could find that Midland negligently violated the Fair Credit Reporting Act.
The Eleventh Circuit also held that a jury could find that Midland willfully violated the FCRA because (1) Midland obtained the debts without requiring the debt sellers to include account level documentation; and (2) Midland’s investigation process is automated and does not include human intervention to determine whether account level documentation would be appropriate as a part of the reinvestigation process.
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